January 10, 2003

Tankers banned by EU could head for U.S.
It's widely accepted that OPA 90 has deterred operators of older tankers from offering them for voyages to the U.S. But yesterday a Senate panel was warned that tankers barred from Europe by tough "post-Prestige" measures could well head for U.S. waters.

Robert N. Cowen, Senior Vice President and Chief Operating Officer of Overseas Shipholding Group, Inc. told a hearing of the U.S. Senate Committee on Commerce, Science and Transportation that "proof that current U.S. rules encourage substandard tonnage to enter the U.S. is all too evident today in the VLCC trade. Shockingly, a disproportionately large number of the world's remaining 25 year old single hull VLCCs are trading to the U.S. Gulf each day."

Under an exception to the phase out rules of OPA 90, explained Cowen. these vessels are permitted to offload 18 miles off the coast of Louisiana at LOOP or to lighter in designated areas of the U.S. Gulf as close as 60 miles from shore.

"For a number of years, it has been well known in the tanker business," said Cowen, "that such vessels are not welcome in Japan or Korea. Since the Erika incident in 1999, it is also the fact that such vessels are discouraged from calling to the EU."

"Fifty-six single hull VLCCs of 25 years of age or older had been fixed on voyages to the U.S. Gulf Coast in 2002," noted Cowen. "This represents over 40% of all spot liftings worldwide on vessels of this vintage. Only one vessel over 25 years of age was fixed to the EU in all of 2002. Not a single vessel of this vintage discharged in Japan or in Korea. Similarly, 50% of all spot liftings on VLCCs of between 21 and 25 years of age  some 171 liftings  discharged in the U.S. Gulf. Not a single vessel of this vintage discharged in the EU or in Japan or Korea in 2002."

"The trend of over-age VLCCs trading in disproportionately high numbers to the U.S. has unfortunately continued into 2003," hecontinued. "For the first week of this year, on a world-wide basis, a total of six spot fixtures were reported of VLCCs in excess of 20 years of age. Every one of these fixtures of old, single hull VLCCs involved the movement of crude oil from the Middle East to the U.S. Gulf."

"Once the current EU proposals to ban single hull vessels from their ports and coastal waters are put into effect," warned Cowen, "these vessels will be forced to seek employment in trades that still accept them. Under existing U.S. law, a single hull VLCC, Aframax or Panamax (carrying approximately 400,000 barrels) vessel can enter a U.S. port until age 23. If the vessel has either a double bottom or double sides, it can trade to the U.S. until age 28. When single hull vessels are banned entirely from trading in fuel oil or heavy crudes to the EU, where will these vessels trade? As older single hull VLCCs are discouraged from trading to the EU, Japan and Korea, where will these vessels trade? We cannot allow our rules to be more permissive, or these vessels will surely trade here."

The issue is not one of law enforcement, pointed out Cowen, noting that "the Coast Guard has done an admirable job of enforcing OPA 90 requirements."

It is "wholly unacceptable to let the U.S. become the port of last resort," concluded Cowen. "As a matter of law and public policy, the Congress declared in 1990 that the U.S. would ban older, substandard tonnage from its shores. Congress concluded that these vessels represent an unacceptable risk to our environment. Unfortunately, recent incidents in Europe confirm that such vessels continue to trade and do in fact pose a grave risk to our oceans and our coastlines. The U.S. cannot stand by and permit others to adopt more stringent trading rules that drive such vessels to our shores. We must maintain our vigilance and ensure that our rules restrict such vessels from trading to the U.S."